VAT: The sale of Bitcoins by a vendor of goods (an entity or person registered for VAT) is subject to VAT for a VAT Vendor. Section 2(2) defines a currency as “any banknote or other currency of any country”. Because Bitcoin is not a currency of any particular country it is not a currency in terms of the VAT Act. This means that the sale of Bitcoin is subject to VAT if the Seller is a VAT Vendor.
Income Tax: As explained above Bitcoin is NOT a currency in terms of the VAT Act. The tax consequences, in our opinion, is that the normal basic rules of gross income will apply. A taxpayer (resident of the RSA) will have to account for all receipts or accruals in respect of the disposal of the Bitcoin in the annual return of income.
The only question that remains is whether the income is a normal income or perhaps an income of capital nature? If it is pure investment and Bitcoins are held for longer periods, it may be of Capital Nature. However, as the norm is a highly speculative one, any proceeds will then be subject to normal income tax.
Please contact our office for any specific questions regarding Bitcoins.